Australian dollar plunges AGAIN as $53billion is wiped off the ASX as Jim Chalmers takes an extraordinary step on the economy

Treasurer Jim Chalmers has called an emergency crisis meeting of Australia’s top economic officials to deal with Donald Trump’s tariffs – as the Australian dollar plunged to a new, five-year low and another $50billion was wiped from shares.

The unprecedented gathering during an election campaign will occur after the Trump Administration threatened to impose 104 per cent tariffs on China, Australia’s biggest trading partner.

Financial markets are now expecting another 100 basis points of Reserve Bank interest rate cuts by the end of 2025, causing the Australian dollar to sink to a new, five-year low of 59 US cents on Wednesday morning.

The Australian share market was 1.9 per cent weaker in early trade, with the benchmark S&P/ASX200 losing another $53billion just half an hour after the market opened.

‘We’re working closely with the regulators and financial institutions to ensure that everything possible is being done to safeguard Australians from this global volatility,’ Mr Chalmers said.

‘These escalating trade tensions are casting a dark shadow over the global economy but Australia’s robust economy and budget puts us in good stead.’

Reserve Bank of Australia Governor Michele Bullock and Treasury Secretary Steven Kennedy have been summonsed to the Wednesday meeting.

Banking regulator John Lonsdale, the chairman of the Australian Prudential Regulation Authority, will also be in attendance along with Australian Securities and Investments Commission chair Joe Longo and Australian Competition and Consumer Commission chief Gina Cass-Gottlieb.

Treasurer Jim Chalmers has called an emergency crisis meeting of Australia’s top economic officials to deal with Donald Trump ‘s tariffs

Fears about a global recession have hammered the Australian dollar, which on Wednesday fell to 59 US cents for the first time since March 2020 during the start of Covid. 

The futures market now regards a super-sized 50 basis point Reserve Bank interest rate cut on May 20 as an 82 per cent chance.

It also sees the RBA cutting rates to 3.1 per cent by the end of 2025, down from 4.1 per cent now.

Another 100 basis points worth of cuts, on top of February’s easing, would see the cash rate fall to the lowest level since February 2023. 

Opposition Leader Peter Dutton claimed a recession was now looking more likely as the Trump tariffs battered global financial markets.

‘It is under Labor. Huge tsunami waves will hit our shores in no time at all,’ he said.

Mr Chalmers slammed Mr Dutton for talking up recession fears – even though economists are now concerned about a severe economic downturn.

‘With his reckless comments on a recession, Peter Dutton has proven again today why he is the biggest risk to Australia’s economy,’ he said.

The unprecedented gathering during an election campaign has occurred after the Trump Administration threaten to impose 104 per cent tariffs on China , Australia’s biggest trading partner (pictured is US President Donald Trump with coal miners in the White House)

But AMP deputy chief economist Diana Mousina said even more aggressive rate cuts were possible to mitigate the risk of a recession in Australia, including a larger 50 basis point rate cut in May.

‘If the hit to Australian growth and financial markets is larger than expected from US and reciprocal tariffs, we may see a faster and more aggressive cutting cycle this year, with potentially four more rate cuts this year alone and a 50 basis point rate cut can’t be ruled out at the May board meeting, as a form of insurance against any recession risks,’ she said.

‘The large falls in global share markets from US tariffs and the potential hit to global growth means that larger and faster rate cuts could occur in coming months.’

If the rate cuts were less aggressive, Ms Mousina expected the Reserve Bank cash rate to fall to 3.1 per cent by 2026, which would be lower than the average level of the 2010s when inflation was consistently below the RBA’s 2 to 3 per cent target.

‘Interest rates are likely to fall further this year and the growth threat from tariffs increases the need for rate cuts,’ she said.

‘We expect the cash rate to decline to 3.6 per cent by the end of this year and to end the cutting cycle at 3.1 per cent. 

‘This is higher than average interest rates in the decade prior to Covid.’

The Australian share market lost more than $100billion on Monday, as the Trump tariffs stirred fears of a global recession.

The losses occurred again on Wednesday morning with the benchmark S&P/ASX200 losing 1.9 per cent during the first half hour of trade, wiping another $53billion off investments. 

The Trump Administration is inflicting 10 per cent tariffs on Australia despite the US having a trade surplus with Australia dating back to 1952. 

Prohibitive tariffs on China are expected to see Asian nations flood Australian with cheap goods, which could potentially bring down inflation and give the RBA room to cut interest rates.

This would occur even with a weak Australian dollar, which would traditionally make imports more expensive.